Share this story

The Federal Communications Commission's primary justification for eliminating Title II net neutrality rules is that broadband network investment has tanked since the rules were implemented two years ago.

FCC Chairman Ajit Pai has cited a few research reports describing declines in capital expenditures, and industry lobbyists have repeatedly argued that investment was harmed by the FCC classifying ISPs as common carriers under Title II of the Communications Act. But when ISPs talk to their investors, the story is completely different.

Further Reading

"We found that not a single publicly traded US ISP ever told its investors (or the SEC) that Title II negatively impacted its own investments specifically," pro-net neutrality advocacy group Free Press said in a report issued yesterday.

The Free Press report also disputes the investment numbers cited by Pai, saying that its own analysis shows an increase in network investment spending since the 2015 Title II net neutrality order. It isn't surprising that people on opposite sides of the issue would come to different conclusions on investment data. What can't be disputed is the fact that ISPs have given a rosy picture to investors, and the Free Press report provides examples of ISPs affirming that Title II hasn't hurt them:

In December 2015, AT&T’s CEO told investors that the company would “deploy more fiber” in 2016 than it did in 2015 and that Title II would not impede its future business plans.

In December 2016, Comcast’s chief financial officer admitted to investors that any concerns it had about reclassification were based only on “the fear of what Title II could have meant, more than what it actually meant.”

Just a few days after the election, Cablevision and Suddenlink’s parent company Altice reaffirmed its plan to deploy FTTH [fiber-to-the-home] service to all of its customers and told investors that it remained “focused on upgrading our broadband networks to drive increases in broadband speeds and better customer experience.”

Despite increasing its own capital investment by 10.2 percent in Q1 2017, Comcast claimed in a blog post last month that the FCC's treatment of broadband providers "harms investment and innovation."

Investment continues

Publicly traded companies are required to give investors accurate financial information, including a description of risk factors involved in investing in the company. If Title II imposed significant financial burdens on publicly traded Internet providers, the companies should have informed investors. Instead, ISPs either haven't mentioned Title II in calls with investors or have said the FCC policy hasn't affected their investment, according to the Free Press report.

And ISPs have continued investing in order to expand network capacity. Free Press provided many examples that you can read in the full report. Here are a few regarding some of the biggest ISPs:

Comcast spent $7.6 billion on its cable segment capital expenditures during 2016, the most the company has ever invested in a single year.

Charter Communications is yet another example of an ISP that dramatically increased its network investments during the two years following the FCC’s Open Internet Order vote... From 2015–2016 Charter’s pro forma capital investments [including newly acquired Time Warner Cable and Bright House Networks] topped $14.5 billion, a 15 percent increase which came despite hundreds of millions of dollars (or more) in synergies that Charter claimed following the May 2016 closing of the deal.

Verizon’s capital investment total increased during the year following the FCC’s adoption of the Open Internet Order (just as the company said it would a month before the February 2015 vote). And Verizon’s total two-year post-vote capital expenditures were 3.1 percent higher than they were in the two years preceding the vote, even as the company divested its Florida, Texas, and California systems to Frontier Communications.

There has also been an "explosion" in online video competition since the imposition of net neutrality rules that prevents ISPs from trying to restrict access to sites that compete against their cable TV offerings, Free Press wrote.

AT&T CEO Randall Stephenson said in a January 2017 earnings call that Title II regulation is "suppressive to investment," but appeared to be talking about the industry in general rather than AT&T specifically. He did not attribute any investment decline at AT&T to Title II. In December 2015, Stephenson said the Title II rules were not an impediment to AT&T and that "Everything that we’re planning on doing fits within those rules."

Pai vs. Free Press

Pai publicly expressed his disdain for Free Press in the speech in which he announced his plan to dismantle net neutrality rules, calling it "a spectacularly misnamed Beltway lobbying group" that demands government control over the Internet.

Free Press notes that USTelecom and Singer excluded the money Sprint used on a "new strategy of purchasing smartphones and then leasing them to its customers," even though "purchasing equipment to lease is a real capital expense, recognized under Generally Accepted Accounting Principles ('GAAP')."

"Sprint risked billions of dollars to purchase and then lease handsets. That is a key part of its broadband business strategy, and no different than a cable ISP’s purchasing and leasing of modems," Free Press wrote.

Singer argues that "it is important to ignore Sprint’s capitalization of handsets, an accounting change that occurred in the middle of the experiment," and notes that Sprint itself "breaks out these 'investments' separately from network investment." Singer also argues that AT&T's investment numbers have declined by an unexpected amount, especially when you exclude the company's investments in DirecTV and some Mexican cellular properties.

But AT&T predicted its own spending decline years before the FCC considered the use of Title II to enforce net neutrality rules. In November 2012, AT&T said it would increase capital expenditures in wireless and wireline for three years and return to the previous, lower investment levels starting in 2015. By February 2015, AT&T told investors that it had "substantially completed" the project.

"Because AT&T alone accounts for nearly a third of the total ISP industry’s investments, any cyclical shift at AT&T can impact the aggregate in a manner that swamps the overall actual trend," Free Press wrote. But even including AT&T, Free Press said it found a 5 percent increase in ISP investment during the two-year period after the net neutrality vote and capital increases at 16 of 24 publicly traded ISPs:

"These increases are due primarily to continued core network expansion as well as investments in capital equipment needed to expand lines of business that utilize the same network (e.g., customer-premise equipment such as modems or IP-based video set-top boxes)," Free Press wrote.

Like the AT&T decline, "any increases or decreases in capital spending at each individual firm were clearly explained by each company before, during and after the FCC’s Open Internet vote. None of the firms that saw declines attributed them to any FCC action," Free Press said. Even those ISPs that did spend less "continue[d] to increase broadband-network capacity." AT&T, for example, has been providing gigabit speeds over fiber to millions of new customer locations, though it has also failed to upgrade old copper networks in many less profitable areas.

FCC votes on Thursday

On Thursday this week, Pai's Republican majority is expected to approve a Notice of Proposed Rulemaking that would eliminate the Title II classification and eliminate or replace the net neutrality rules. (A final vote, after public comment, would occur in the second half of this year.) Pai claims that this action will reverse a decline in broadband spending and encourage ISPs to bring Internet access to more people.

Don't believe him, Free Press says. "Chairman Pai’s only supposed justification for dismantling the FCC’s Title II-based Open Internet framework is the utterly false claim that it dampens ISP investments," the group wrote. "He has nothing but phony and nonspecific evidence to support his irrational belief, which runs contrary to the stunning number of verifiable counterfactuals."

Disclosure: The Advance/Newhouse Partnership, which owns about 13 percent of Charter, is part of Advance Publications. Advance Publications owns Condé Nast, which owns Ars Technica.

Promoted Comments

What's the consequence of telling the leaders of your country that Net Neutrality is going to kill infrastructure investment (a very big problem!) while at the exact same time telling you investors that regardless of what happens with Net Neutrality your infrastructure investment plans will not change?

Are you lying to the Government? The investors? Both?

It doesn't matter. You're not accountable. No one cares.

No, they're definitely accountable to investors. They're not accountable to the government unless they're breaking laws or (demonstrably) lying under oath, though. That's why this information is so damning, really - when they're talking to the one group they're legally required to be honest with, they make it clear that it's not going to harm investment.

It's also why this information is so utterly useless in terms of policy-making. If they were accountable to the government then they could be sued, and that could have at least some influence on the process. Since they aren't, there's nothing that can be done to force this kind of report into the discussion.

Let me play devils advocate here and suggest Pai might be thinking the NN hurts network investment vs. not. I can see the rationale behind the statement that: more regulation is more burdensome than less regulation...

Except NN isn't especially burdensome. It's basically "don't do this one thing," which most ISPs weren't doing anyway. And it's not really tied to network investment at all.

This is why no ISP has stated that NN negatively impacted their network investment. The one major company that did reduce the amount of money they invested into their network, AT&T, had already planned to reduce prior to the Title II change, and still doesn't blame the Title II change.

Theoretically, NN has cut off possible avenues of additional revenue for ISPs, such as charging more for "fast lanes," but we shouldn't allow something harmful to both consumers and other companies, just because it lets ISPs make more money. The FCC isn't there to help ISPs/Teclos/Cable companies make money, but to serve the public good.

71 Reader Comments

Jon, Jon. Don't you get it? Facts don't matter to men like Pai. They know what they want to do, and they just do it. It doesn't matter if the things they say to justify it are fair, reasonable, accurate, or even truthful!

What's the consequence of telling the leaders of your country that Net Neutrality is going to kill infrastructure investment (a very big problem!) while at the exact same time telling you investors that regardless of what happens with Net Neutrality your infrastructure investment plans will not change?

Publicly traded companies are required to give investors accurate financial information, including a description of risk factors involved in investing in the company. If Title II imposed significant financial burdens on publicly traded Internet providers, the companies should have informed investors. Instead, ISPs either haven't mentioned Title II in calls with investors or have said the FCC policy hasn't affected their investment, according to the Free Press report.

What's the consequence of telling the leaders of your country that Net Neutrality is going to kill infrastructure investment (a very big problem!) while at the exact same time telling you investors that regardless of what happens with Net Neutrality your infrastructure investment plans will not change?

Are you lying to the Government? The investors? Both?

It doesn't matter. You're not accountable. No one cares.

No, they're definitely accountable to investors. They're not accountable to the government unless they're breaking laws or (demonstrably) lying under oath, though. That's why this information is so damning, really - when they're talking to the one group they're legally required to be honest with, they make it clear that it's not going to harm investment.

It's also why this information is so utterly useless in terms of policy-making. If they were accountable to the government then they could be sued, and that could have at least some influence on the process. Since they aren't, there's nothing that can be done to force this kind of report into the discussion.

Don't believe him, Free Press says. "Chairman Pai’s only supposed justification for dismantling the FCC’s Title II-based Open Internet framework is the utterly false claim that it dampens ISP investments," the group wrote. "He has nothing but phony and nonspecific evidence to support his irrational belief, which runs contrary to the stunning number of verifiable counterfactuals."

I just want to know what it will take for people to stop listening to people like Pai when everything they say flies in the face of the facts that are coming from the very entities that they are trying to screw us all over to help out. I just want to know if even in a small corner of his heart and mind he feels like a moron when stuff like this comes out and he is shown to be the liar that he is. Probably not.

He's like the boy scout who asks the old lady if she needs help crossing the street and when she says no he hits her with a club and says, "yes you do!"

I just want to know what it will take for people to stop listening to people like Pai when everything they say flies in the face of the facts that are coming from the very entities that they are trying to screw us all over to help out.

That's the thing, virtually nobody has to believe what Pai is saying. As long as he and the Republican agenda are on top at the FCC, he could say he's going to kill Network Neutrality to protect us all from the cotton candy goblins and it'll still be policy.

FCC Chairman Ajit Pai has cited a few research reports describing declines in capital expenditures, and industry lobbyists have repeatedly argued that investment was harmed by the FCC classifying ISPs as common carriers under Title II of the Communications Act. But when ISPs talk to their investors, the story is completely different.

Someone needs to make sure the investor data is submitted to the request for comments on the upcoming Net Neutrality vote.

FCC Chairman Ajit Pai has cited a few research reports describing declines in capital expenditures, and industry lobbyists have repeatedly argued that investment was harmed by the FCC classifying ISPs as common carriers under Title II of the Communications Act. But when ISPs talk to their investors, the story is completely different.

Someone needs to make sure the investor data is submitted to the request for comments on the upcoming Net Neutrality vote.

Someone needs to compel Pai to testify under oath that what he says is truthful so that he may be jailed quickly when the obvious falsehood of his comments is revealed.

That isn't very fair to Mr. Pai.

When they vote on the final rule, it will be sued over and this will be one of the things - that the regulation was not based on facts. They'll probably lose on this as a court has already said that the FCC has the power to regulate telcom in a manner of its choosing.

When they make a law restricting voting, they must show that it's based on facts because voting is guaranteed per the constitution and if opponents can show the law restricts voting and is not based on a public need it can be struck down. Unfortunately, telecommunications isn't a human right like voting is, so the FCC needs no rationale to take this action.

Let me play devils advocate here and suggest Pai might be thinking the NN hurts network investment vs. not. I can see the rationale behind the statement that: more regulation is more burdensome than less regulation.

The problem is that philosophy is only part of the equation. When everyone plays by the same rules, comparatively speaking, no one is less burdened than anyone else in the same market, assuming that NN does hurt networking investment realistically (of which there is no evidence to support that assumption anyway).

Do safety regulations burden vehicle manufactures? Of course they do during the manufacturing and design phase, but those costs are worth it to consumers at the point of sale where they do not have any net impact on the industry.

I would wager the same is true for NN. It is not so burdensome where ISPs are going to shut down and stop doing business-- they are going to find a way around new rules as all companies do to offset any additional costs. Any additional burden (again, even if something exists) is worth it to consumers in this case, and will not keep people from buying internet, which is what the focus should be on.

So, the whole point of all this is money, right? Some powerful ISP lobby wants net neutrality to go away so more money can be made, correct?

Because, they might want to re-evaluate that assumption. Net neutrality may acutally make people use the internet for more things (duh?), which makes people use the internet more. Making the internet harder to use, with more stipulations, and speeds that change based on the site, and throttling, and so on may actually make you less money ISPs. LESS money...

You are going to make everyone using your service mad at you, so that maybe you can make a little more in some instances? Is that really going to increase your profits?

Localities can force a level playing field by refusing to renew the license for cable companies to operate. If the FCC undoes net neutrality the ISPs could end up with 10,000 different communities adding wildly varying terms to their cable franchise agreements.

Personally I would like the see a rule made that monopoly last mile operators can not also own content providers. That is an utter conflict of interest and likely the root cause of the whole net neutrality argument. Let's add that provision to my town's franchisee agreement when it comes up for renewal and see what happens.

Spin the last miles off into regulated, common carrier companies. Once the last mile spinoff occurs, Comcast/Verizon would be free of Title II. Heck, a lot of localities might purchase the last mile infrastructure back from the ISPs. But until they divest their last mile monopolies, regulate then like the common carriers they truly are with Title II.

Let me play devils advocate here and suggest Pai might be thinking the NN hurts network investment vs. not. I can see the rationale behind the statement that: more regulation is more burdensome than less regulation...

Except NN isn't especially burdensome. It's basically "don't do this one thing," which most ISPs weren't doing anyway. And it's not really tied to network investment at all.

This is why no ISP has stated that NN negatively impacted their network investment. The one major company that did reduce the amount of money they invested into their network, AT&T, had already planned to reduce prior to the Title II change, and still doesn't blame the Title II change.

Theoretically, NN has cut off possible avenues of additional revenue for ISPs, such as charging more for "fast lanes," but we shouldn't allow something harmful to both consumers and other companies, just because it lets ISPs make more money. The FCC isn't there to help ISPs/Teclos/Cable companies make money, but to serve the public good.

Localities can force a level playing field by refusing to renew the license for cable companies to operate. If the FCC undoes net neutrality the ISPs could end up with 10,000 different communities adding wildly varying terms to their cable franchise agreements.

Personally I would like the see a rule made that monopoly last mile operators can not also own content providers. That is an utter conflict of interest and likely the root cause of the whole net neutrality argument. Let's add that provision to my town's franchisee agreement when it comes up for renewal and see what happens.

Spin the last miles off into regulated, common carrier companies. Once the last mile spinoff occurs, Comcast/Verizon would be free of Title II. Heck, a lot of localities might purchase the last mile infrastructure back from the ISPs. But until they divest their last mile monopolies, regulate then like the common carriers they truly are with Title II.

Fun fact: the last mile of most telecommunications infrastructure is also the part that uses the greatest amounts of state and federal funding to get built in the first place. It's almost as if, I don't know, the people already paid for this stuff with their tax dollars, and the only thing the big telecomms have paid to provide is the cheap/easy link between the bigger grids.

Maybe that's why the ISPs were once just maintainers of the infrastructure, not the owners of it? Naaaaaaaah....

I just want to know what it will take for people to stop listening to people like Pai when everything they say flies in the face of the facts that are coming from the very entities that they are trying to screw us all over to help out. I just want to know if even in a small corner of his heart and mind he feels like a moron when stuff like this comes out and he is shown to be the liar that he is. Probably not.

He's like the boy scout who asks the old lady if she needs help crossing the street and when she says no he hits her with a club and says, "yes you do!"

Unfortunately, such a shift is unlikely to happen in our lifetimes. The constituency of the Republican Party is deeply rooted in in a kclan mentality and places more value in their gut feelings than use of their brains. Their team won and that is all that matters, facts be damned. Until they are directly impacted in a negative way by their 1% overlords they will continue to vote against their own economic interests and drink the Kool-Aid because one day they will be one of these guys so why change the rules before they get there.

Aside from that there is the simple fact that the mainstream—both in terms of the populace and the press—do not track the activities of the FCC. Ars has a techie-oriented audience that pays attention, but before John Oliver’s segment on Ajit Pai’s fuck fest, the general public was mostly uninformed on this matter.

And ISPs have continued investing in order to expand network capacity.

Except for VERIZON that does nothing but bitch about having to repair landlines that they were pre-paid to deploy instead of riding out a transistion to VOIP that they are also bitching about having to deploy to rural areas.

And ISPs have continued investing in order to expand network capacity.

Except for VERIZON that does nothing but bitch about having to repair landlines that they were pre-paid to deploy instead of riding out a transistion to VOIP that they are also bitching about having to deploy to rural areas.

the only thing verizon cares about is $$$. be a few days late on a making a payment and they will send you a nastygram demanding payment that minute or see your ass in court.

Why is it only for Pai to decide?Why cant this important a matter be subject to a vote by the people to settle the matter for all time?

Well, it is actually not for only Pai to decide. Unfortunately, the FCC, like much of the rest of the federal government, is under the control of the Corporate Shill Party. Pai and O'Reilly have consistently voted against consumer protection with regard to Internet access and are now doing all they can to remove those protections. They have been well paid off to insure that what the ISPs want bulldozes what the People (rightfully) want.

FCC Chairman Ajit Pai has cited a few research reports describing declines in capital expenditures, and industry lobbyists have repeatedly argued that investment was harmed by the FCC classifying ISPs as common carriers under Title II of the Communications Act. But when ISPs talk to their investors, the story is completely different.

Someone needs to make sure the investor data is submitted to the request for comments on the upcoming Net Neutrality vote.

And Pai is a fucking moron.

You really shouldn't insult morons.

Exactly. Pai could be forgiven for being dumb. Knowingly fucking the country to serve special interests is worse.

I was just thinking about this on the way in this morning! The people we've given the most power to have the least amount of culpability for their actions. It's getting ridiculous. Look at all the scandals lately: police shootings, United Airlines, corrupt businesses (Theranos), government scandals, etc. I have seen little to no repercussions to those most responsible for these failures. In some cases those in charge even get bonus money on top of it all. We live in an unbelievable world where the only people that are required to be responsible are those being screwed over by the least responsible ones.

That may be a pessimistic view, but it's frustrating seeing all this happen and then handing over a significant portion of my salary to pay for this madness.

I was just thinking about this on the way in this morning! The people we've given the most power to have the least amount of culpability for their actions. It's getting ridiculous. Look at all the scandals lately: police shootings, United Airlines, corrupt businesses (Theranos), government scandals, etc. I have seen little to no repercussions to those most responsible for these failures. In some cases those in charge even get bonus money on top of it all. We live in an unbelievable world where the only people that are required to be responsible are those being screwed over by the least responsible ones.

That may be a pessimistic view, but it's frustrating seeing all this happen and then handing over a significant portion of my salary to pay for this madness.

Don't forget the healthcare system as well where instead of things being decided by your dr its your insurance company if you have insurance.

Don't believe him, Free Press says. "Chairman Pai’s only supposed justification for dismantling the FCC’s Title II-based Open Internet framework is the utterly false claim that it dampens ISP investments," the group wrote. "He has nothing but phony and nonspecific evidence to support his irrational belief, which runs contrary to the stunning number of verifiable counterfactuals."

Pai is a puppet and didn't like Wheeler and is simply abusing his new found authority to try and undo everything Wheeler did in the name of being a "good republican" lacky.

And of course he's going to make shit up to push his agenda. He has no real infomation to back up his actions which leads back to my last comment about justifying his abuse of authority.

[edit 1]Someone needs to dig up some major dirt on Pai that forces him to quit or be fired !

[edit 2]Everyone Make Sure You Go Out To The FCC Website and Submit a Ton of Comments Against Reversing Net Neutrality when it reopens after the Rulemaking Vote:

Why is it only for Pai to decide?Why cant this important a matter be subject to a vote by the people to settle the matter for all time?

The more general answer is: it has been known for a long time that Congress is too gridlocky to actually govern. And so, to conduct the business of government, through law, they have created agencies. And they have given agencies the power to create "rules" (not laws) to govern the things under their jurisdiction. Congress has the power to amend or repeal the rules the agencies come up with if they do not like them.

There are a lot of different agencies in the federal government, as you might imagine.

Look, say what you will about Pai and about Net Neutrality, but the information presented here does not create a very compelling argument - you can make a better case for maintaining the rules set to take effect.

Citing spending on things like fiber by Comcast looks good, but it ignores that infrastructure projects are budgeted and negotiated years in advance - Comcast can't simply cancel everything this year because NN will take effect. They could have budgeted more money above the high water mark spending but walked it back. We don't know. If the general trend over the past decade has been an increase in broadband spending, than you're not really answering an argument that NN lessens spending if the reduction is in the rate of growth, not net spending itself.

Arguing that Sprint giving away handsets should count as broadband investment is also silly; if I get a subsidized iPhone, it's not really changing anything for my neighborhood and it's not changing anything for me if I already had broadband access on a prior device.

Furthermore, none of the comments to investors about investments and NN make clear what I pointed out above; prior plans haven't changed and neither has the need to modernize over time, but what will the rate of increase in investment be? Will NN lower it or raise it, or have no effect?

Again, I think that there are stronger arguments to make for NN, and this stuff seems a little weak.

What's the consequence of telling the leaders of your country that Net Neutrality is going to kill infrastructure investment (a very big problem!) while at the exact same time telling you investors that regardless of what happens with Net Neutrality your infrastructure investment plans will not change?

Are you lying to the Government? The investors? Both?

It doesn't matter. You're not accountable. No one cares.

I am naively optimistic that the judges hearing the lawsuit over Pai's arbitrary action to reverse net neutrality will accept these statements as evidence.

What's the consequence of telling the leaders of your country that Net Neutrality is going to kill infrastructure investment (a very big problem!) while at the exact same time telling you investors that regardless of what happens with Net Neutrality your infrastructure investment plans will not change?

Are you lying to the Government? The investors? Both?

It doesn't matter. You're not accountable. No one cares.

I am naively optimistic that the judges hearing the lawsuit over Pai's arbitrary action to reverse net neutrality will accept these statements as evidence.

no guarantee the fcc wont appeal all the way to SCOTUS for a favorable ruling

Why is it only for Pai to decide?Why cant this important a matter be subject to a vote by the people to settle the matter for all time?

That was, in a way, part of Pai's argument for canceling the impending implementation of Wheeler's NN rules. The claim that the FCC does not have authority, or should not, to reclassify things so that they fall under old Title II rules. Right now, ISPs are covered by the FTC; Wheeler usurped that. If the FCC should regulate ISPs, then Congress needs to change the law and take that regulation authority away from the FTC. An agency head shouldn't do that.

Whatever (negative) feelings you have about Pai, I am not very comfortable with the prospect of agency turf wars over who can regulate what - let Congress decide and be accountable for that.

What kind of democracy do we have when the majority loses over and over?

Don't worry. Once DeVos has her way with the Dept of Education, they'll be able to redefine "Democracy" to all the addled-brained twits they'll force feed the whole mound of manure that is her party's racist, greedy, and corrupt ideologies.

What's most humorous about it all is the fact that the only reason Pai HAS the job he has now is because of the very people he's cutting off at the knees. The good ol' boy club this dipshit is blindly following would have never have even let him through the front door if they'd been given a choice in the matter. He'd be lucky if he learned to read or write and be expected to be grateful for the nothing his masters 'gave' him.